TMI Blog2019 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... n be made between the ITC which was available to the Respondent before 01.07 2017 and after 01.07.2017 to determine whether the Respondent had benefitted from additional availability of ITC or not. There has been no additional benefit of ITC to the Respondent and hence he was not required to pass on its benefit to the above Applicant by reducing the price of the flat. The Applicant No. 1 could have availed the above benefit only if the above project was under execution before coming in to force of the GST as the Respondent would have been eligible to avail ITC on the purchase of goods and services after 01.07.2017 on which he was not entitled to do so before the above date. Since there was no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. It is clear from Section 171 (1) of the CGST Act, 2017, that there should either be reduction in the rate of tax or the benefit of ITC which is required to be passed on to the recipients by commensurate reduction in the price - Since there has been no reduction in the rate of tax or benefit of additional ITC to the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 of the CGST Rules, 2017 asking the Respondent whether he admitted that the benefit of ITC had not been passed on to the Applicant No. 1 by way of commensurate reduction in price of the flat and incase it was so, to suo moto determine the quantum of the ITC the benefit of which had been denied thereof and mention it in his reply and to produce all necessary evidence. The Respondent was also afforded opportunity of inspecting the non-confidential evidence/information supplied by the Applicant No. 1 between 18.09.2018 and 20.09.2018 but the Respondent had not availed it. Similar opportunity was also given to the Applicant No. 1 by the DGAP vide email dated 17.10.2018 who had inspected the documents furnished by the Respondent on 22.10.2018. 3. The DGAP vide his Report dated 30.10.2018 had stated that the Respondent had submitted replies vide his letters dated 25.09.2018 and 27.09.2018 in which he had submitted that the project Solera-2 was being executed by the Respondent under the AHP framed by the State of Haryana. The flats constructed under the AHP were required to be allotted by draw of lots which took place in the presence of the representatives of the above Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taxes as cost, on which now ITC could be claimed or the rate of tax in respect of which had now been reduced after coming in to force of the CST and both these benefits were required to be passed on to the recipients in the form of price reduction. The DGAP had also reported that the Respondent had claimed that he was not supplying any service to the Applicant No. 1 earlier and the price for the flat had been offered for the first time in the post-GST period after taking in to account the output tax and the benefit of ITC and since the flats sold by the Respondent were not under construction in the pre-GST regime and the construction had commenced after introduction of GST and hence no price reduction was required to be made. The Respondent had also claimed that the Applicant No. 1 was given allotment in the month of November, 2017 and the payment was made for the first time by him in the month of August, 2017 and therefore, the Applicant No. 1 was bound to purchase the flat at the price offered by the Respondent for the first time under the post-GST period and since the flat sold by the Respondent had no price history there was no question of revising the price- The DGAP had als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led that the project Solera-2 was indeed started in the post-GST regime and there was no price history of the flats sold in the pre-GST period which could be compared with the post-GST base price to determine profiteering. He had further submitted that as per para 5 of the AHP (Annexure-A) notified by the Haryana Government on 19.08.2013, the maximum rate per sq. ft. of carpet area which could be charged from the allottes was ₹ 4000/per sq. ft. however, the suppliers of the construction services were at liberty to fix their base price subject to the ceiling of ₹ 4000/- per sq. ft. The DGAP had also claimed that in the present case, the advertisement for start of the project, the pre-booking payments, draw of lots, allotment of units and receipt of payments had taken place post-GST and hence there was no pre-GST tax rate or ITC which could be compared with the post-GST tax rate and ITC which the Respondent could have taken in to account to pass on the benefits of tax reduction or ITC which had become available to him post coming in to force of the GST. 6. The DGAP had finally submitted that the provisions of Section 171 (1) of the CGST Act, 2017 would be attract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that in this case, since the project was started after coming in to force of the GST w.e.f. 01. 07.2017, there was no pre-GST tax rate or ITC which could be compared with the post-GST tax rate and the ITC to come to the conclusion that there was benefit which was required to be passed on by way of commensurate reduction in price. He has further submitted that on perusal of the application it was revealed that the above Applicant had only alleged that the Respondent had not recalibrated the cost of the flat booked under the AHP, to pass on the benefit of ITC and he had not made any allegation of reduction in the rate of GST from 12% to 8% w.e.f. 25.01.2018. The DGAP has also stated that perusal of Annexure-5 attached with the Report dated 30.10.2018 showed that the Respondent had charged 12% GST on the base price of Rs- 4,000/- per sq. ft., till 24.01.2018 and 8% GST on the above price w.e.f. 25.01.2018 and hence there had been no profiteering due to reduction in the GST rate form 12% to 8% w.e.f. 25.01.2018. He has further stated that due to the above reasons the provisions of Section 171 (1) of the CGST Act, 2017 had not been violated. 8. This Report was considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if they opted for old rates, they were required to pay GST @ 8% on affordable houses and @ 12 % on other housing projects with ITC. He has further contended that the Respondent had intimated him vide his email dated 04.04.2019 that he had chosen to charge GST at the existing rate of 8% on the sale of affordable houses in his Solera-2 project and therefore, it was clear that the Respondent would transfer the benefit of ITC to the buyers from the very beginning in the same manner @ 8%. He has also argued that if no ITC benefit was to be given there was no point in paying GST at the higher rate of 8% instead of 1% which was contrary to the GST Rules framed by the Govt. He has also stated that he had received demand letter dated 01.04.2019 for ₹ 3,17,664/- with 8% GST and no benefit of ITC had been passed on to him till date and in case this ITC benefit was passed on to the buyers, it would not mean that the Respondent was paying it from his own pocket. 10. Through his submissions dated 29.04.2019, the Applicant No. 1 has stated that as per the Haryana Building By Laws only 4% of the total land could be used by the developer for construction of commercial shops within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rates for the new project than the Solera-2 project which was to be completed in September, 2021. 12. The Respondent vide his submissions dated 16.05.2019 has stated that he had started the Affordable Housing Project Solera-2 on 24.07.2017 after getting the building plans approved from the Government of Haryana on 07.06.2017 under the AHP. He has also stated that an advertisement was published in the Times of India on 24.07.2018 inviting applications for allotment of the flats under the AHP from the prospective buyers along with the application fee equal to 5% of the cost of the unit and the draw of lots for allotment was held on 16.11.2017, under the supervision of a committee constituted by the State of Haryana and the successful applicants were given letters of allotment by the Respondent. He has further stated that the Builder-Buyer agreements containing all the terms conditions of the allotment were executed on 13.12.2017 between the Respondent and the successful applicants. He has also claimed that the consideration for the flat was fixed @ 4000/- per sq. ft. on the carpet area and the balcony area was charged @ 500/- per sq. ft. and in addition to the total con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11/2017- Central Tax (rate) dated 28.06.2017 on the recommendations of the GST Council given in its 33rd meeting held on 24.02.2019 and in the 34th meeting held on 19.03.2019 has claimed that the rates of GST on the residential projects had been revised due to which the GST @ 1% without ITC was to be charged for the affordable housing projects, GST @ 5% without ITC was leviable for the other residential properties other than affordable houses and GST @ 12% with ITC was to be charged on the commercial properties other than specified ones on which it would attract GST @ 5%. 13. The Respondent has also argued that the GST Council in its 34 meeting held on 19.03.2019, had reconsidered its earlier recommendation given in the 33rd meeting and given one time option to the developers of the ongoing projects to either opt for the new rate of tax mentioned above or to continue charging the existing old rate of GST due to the reason that the developers of the ongoing projects had already calibrated the ITC at the time of launching of the projects by considering ITC adjustable against their output tax liability and new tax rates of 1% or 5% without ITC would make it difficult for them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osit vide Cheque No. 004057 dated 11.08.2017 which was encashed on 18.08.2017. The draw of lots for allotment of houses was conducted on 16.11.2017 in the presence of the committee constituted under the above Policy and the Applicant No. 1 was allotted a flat on 20.11.2017. The Applicant No. 1 had himself admitted these facts in his letter dated 21.09.2018 addressed to the Respondent a copy of which has been placed on record as Annexure-7 by the DGAP. He had also withdrawn his complaint made against the denial of benefit of ITC to him vide this letter. It is also revealed that an agreement was executed between the above Applicant and the Respondent on 13.12.2017 vide which the terms and conditions for allotment of Flat No. A-5/907 in Block/Tower A-5 having carpet area of 577.946 sq. ft. and balcony area of 82.57 sq. ft. were settled. Clause 4.1 of the agreement shows that the Applicant No. 1 was required to pay price of ₹ 4000/- per sq. ft. for the carpet area and ₹ 500/- per sq. ft. for the balcony area at the total sale consideration of ₹ 23,53,069/-. As per Explanation (v) given below Clause 4.1 of the agreement the Applicant No. 1 was required to pay GST in ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in this behalf are incorrect and therefore, the same cannot be accepted. 17. The above Applicant has also claimed that the rate of tax had been reduced from 12% to 8% by the Central Government vide its Notification dated 21.01.2018 and as per the directive issued by the CBIC he should not have been charged GST on the amount which he had deposited. However, it is apparent from the record that the price of the above flat of ₹ 4000/- per sq. ft. was fixed under the above Policy after taking in to account the availability of ITC post-GST. Moreover, as per the terms and conditions of the agreement dated 13.12.2017, the Applicant had himself agreed to bear the burden of GST and therefore, he cannot resile from his commitment. Hence, the claim made by the above Applicant is untenable. 18. It is also established from the evidence placed on record that the Respondent has charged GST @ 12% from the Applicant No. 1 as per the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 and subsequently levied it @ 8% w.e.f. 25.01.2018 as per the Notification No. 1/2018-Central tax (Rate) dated 21.01.2018 and hence the rate of tax has been correctly charged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him @ 8% and there was no logic in paying GST at the above rate when he could have paid it @ 1%. This claim of the above Applicant is unreasonable as the Respondent is entitled to opt for paying GST @ 8% and charge it from his customers accordingly. As per the terms of the agreement the above Applicant is bound to pay the GST in addition to the sale consideration and hence he cannot claim that he should be passed on the benefit of ITC @ 8%. The implication of ITC has already been considered by the Respondent while fixing price of the flat post-GST and hence no benefit of ITC is due to the above Applicant. Therefore, the contention of the Applicant No. 1 made on this ground is not justified. 22. Perusal of Section 171 (1) of the CGST Act, 2017 shows that it reads as under:- any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. It is clear from the above Section that there should either be reduction in the rate of tax or the benefit of ITC which is required to be passed on to the recipients by commensurate reduction in the price. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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